As Koch Industries Inc. of Wichita, Kan., purchases Georgia-Pacific Corp. for $21 billion, including debt, many in the plastics industry are pondering what comes next for GP's thermoforming and injection molding assets.
Some say a sale is inevitable, because plastics processing is not a core area for Georgia-Pacific, and Koch will have to sell parts of its business to pay down debt. The deal's equity portion is valued at $13.2 billion.
Others say Koch may choose to keep the plastics operations.
The transaction, announced Nov. 14, means that family-owned industrial/agricultural conglomerate Koch now will be integrated as it marries its resin manufacturing platform with GP's thermoforming and injection molding operations, a structure Koch might fully desire.
``There's a growing realization on the part of material manufacturers that they need to have access to end markets,'' said one plastics industry source, who spoke on the condition of anonymity. ``I'd be interested to see how it turns out.''
GP will become a privately held subsidiary under Koch and continue to operate out of its Atlanta headquarters. The transaction includes all assets, officials said, including Georgia-Pacific's four thermoforming plants and three injection molding sites.
``It doesn't fit,'' one industry source said of the plastics assets. ``The vertical-integration concept now doesn't work as well. You can't be efficient in all those industries. And some of GP's assets are not on a global scale.''
GP's largest businesses are consumer products and building products, and it is the second-largest U.S. forest products manufacturer, behind International Paper, according to Hoover's Inc. Georgia-Pacific Resins Inc., also based in Atlanta, makes adhesives and thermoset resins. Those products include traditional phenolic resins and patented Arylzene specialty resins. That unit posted 2004 sales of $588 million.
A spokeswoman for Koch said the firm already has limited processing capability through the chemical side of its business, although she was not specific on those assets.
Asked if there would be any potential for sale of the plastics operations, she said: ``We're excited about the facilities and assets. Koch is positioning the business for long-term growth.''
In a letter to employees, Koch officials said the acquisition is the firm's largest to date. In 2001, the firm bought full ownership of KoSa BV, a joint venture that makes PET resin. In 2003, it added DuPont Co.'s Invista fiber business for $4.4 billion.
Publicly held GP recorded 2004 sales of $19.6 billion, with 55,000 employees. According to Plastics News' ranking of injection molders, the group had estimated injection molding sales last year of $60 million, with 300 employees. Its thermoforming operations had an estimated $132 million in 2004 sales.